Patsystems Pte Ltd v. PT Bursa Komoditi dan Derivatif Indonesia is a 2019 decision of the High Court of Singapore in a dispute between a trading software vendor and its licensee, an Indonesian commodities and derivatives exchange, over unpaid support and maintenance (S&M) fees. The customer had paid a US$1.5 million perpetual licence fee but withheld most S&M payments from 2010, citing problems with the software and relying on emails from the vendor’s regional director. Judicial Commissioner Mavis Chionh held that those emails were non-binding goodwill gestures, rejected promissory estoppel, entered judgment for US$604,340.68 with contractual interest, and dismissed the customer’s counterclaim for a refund of the licence fee.[1]
Background
Patsystems, a Singapore company, develops computerised trading systems for derivatives markets. On 9 September 2009 it signed a Software Licence & Support Agreement with the exchange, followed by an Addendum dated 1 May 2010. The court described the commercial terms as follows:[1]
| Term | Content |
|---|---|
| Licence fee | US$1.5 million, one time, for a perpetual, non-exclusive, irrevocable and limited licence to use the broker and clearing and matching engine software on the exchange |
| S&M fees | US$150,000 a year for the matching engine and US$75,000 a year for the broker system |
| Usage fee | A charge per lot traded by retail users of certain front-end applications |
| Invoice disputes (cl 7.3) | Pay any undisputed portion and serve a Notice of Dispute within 14 days, failing which the right to dispute the invoice is waived |
| Non-payment (cl 7.2) | After notice, the vendor may suspend the service or terminate |
| Warranty (cl 10) | Compliance with the specifications at acceptance, with stated remedies, and an express disclaimer that the software would be error free or fit for a particular purpose |
| Addendum reviews | Six-monthly reviews; if notified defects were not fixed, the customer could claim a refund or discount of S&M charges by written notice |
The customer signed off user acceptance testing on 29 November 2009. The exchange had a soft launch in late 2009 and an official launch in March 2010. After paying the first S&M instalment of US$112,500 on 9 July 2010, it began withholding further S&M payments, citing multiple problems with the system.[1]
The dispute
The customer relied on two emails from the vendor’s regional director for Asia-Pacific. In an email of 30 May 2011, he proposed that the customer pay the overdue US$112,500 and hold back the next instalment until it signed off on a replacement system, GTA, which would be offered for testing. In an email of 28 March 2012, he proposed as a “compromise” that the customer pay US$75,000 for the broker system while holding the US$150,000 matching engine fee until the platforms moved to the new system. The replacement system was never delivered.[1]
After the ION group acquired the vendor’s parent company in 2012, the new chief executive reviewed the account. Apart from one invoice in March 2012, the vendor issued no invoices between May 2011 and 10 June 2013. On 30 January 2014 it gave six months’ notice of termination, effective 7 August 2014, while continuing to provide support during the notice period. It sued for US$604,340.68 on 17 invoices issued between 28 March 2012 and 19 August 2014.[1]
The customer argued that the emails had varied the contract to let it withhold S&M fees until the replacement system was delivered, or alternatively that the vendor was estopped from insisting on payment. It counterclaimed for a refund of the whole licence fee or damages.[1]
Decision or outcome
The court allowed the vendor’s claim in full and dismissed the counterclaim on 31 October 2018, giving written grounds on 22 May 2019.[1]
No binding variation
The court found that the emails were part of ongoing negotiations about the customer’s complaints and its refusal to pay. Any offers to let the customer hold back payments were non-binding “goodwill gestures”. The 30 May 2011 email referred only to one specific instalment, and the 28 March 2012 email offered the replacement system only “as a short term test”. The customer’s pleaded case on the 2012 arrangement also shifted in closing submissions, which the court said undermined its credibility.[1]
The court treated the director’s internal emails with caution, because he was not legally trained and used words such as “agreed” loosely. It found one internal email telling: in May 2012 he described the customer as “contracted to” US$225,000 a year and proposed a 50 per cent reduction as a goodwill gesture, which would have made no sense if the customer had already been allowed to withhold all fees. A gap in invoicing between 2011 and 2013 did not show an agreement either, because the parties were still negotiating.[1]
No promissory estoppel
Promissory estoppel needed a clear and unequivocal representation that the vendor would not insist on its rights. The emails contained none. Any sense of security the customer took from the absence of invoices was “wholly self-induced”.[1]
Counterclaim
The counterclaim failed on several grounds:[1]
- No “reasonably workable” obligation. The customer had not pleaded that the warranty, or an implied term, required a “reasonably workable” system. In any event, the warranty was to comply with the specifications at acceptance, the agreement expressly disclaimed error-free operation and fitness for purpose, and the general aims stated in the support schedule were a “motherhood statement”. An entire agreement clause excluded reliance on pre-contract sales emails promising a “turnkey” solution.
- No total failure of consideration. This was also not pleaded, and the customer had received the contracted deliverables and benefited from the system, with trading volumes rising from 61,000 contracts in 2010 to 934,000 in 2013.
- Acceptance. The customer had signed off acceptance testing, and the software was in any event deemed accepted once used in a live environment.
The court noted that the Addendum gave the customer a route to a refund or discount of S&M charges for unfixed defects. The customer had served one notice of non-compliance in January 2011 but never followed it with a written request for a refund or discount.[1]
Because the customer had failed to beat the vendor’s offer to settle, the vendor received standard costs up to 24 August 2018 and indemnity costs after that. The customer was given leave to appeal out of time and filed a notice of appeal on 23 January 2019. No appellate decision was found on the Supreme Court of Singapore’s judgment database.[1]
Significance for software licensing and SAM practice
The case is about maintenance fees rather than licence quantities, but it concerns the same commercial relationship that licence managers handle: a perpetual licence with a separate, recurring support charge.
- Support fees are a separate debt. Dissatisfaction with the software did not entitle the customer to stop paying S&M fees, because the agreement set out specific remedies and the customer did not use them.[1]
- Account managers’ emails. Informal proposals from a vendor’s sales or account staff were treated as negotiation, not as contract changes. A later change of ownership at the vendor brought a strict review of the account.[1]
- Invoice dispute clauses. The agreement required a written Notice of Dispute within 14 days of an invoice. Such clauses make it important to dispute invoices formally and promptly.[1]
- Disclaimers and entire agreement clauses. These limited the customer to the warranties in the contract and excluded the sales pitch.[1]
Lessons learned
- Withholding maintenance fees is risky without using the contract’s procedures. The customer had a contractual route to a refund or discount of S&M charges but did not complete it.[1]
- Emails offering to defer fees may not be binding. The court treated the regional director’s offers as goodwill gestures within ongoing negotiations.[1]
- Going live can amount to acceptance. Under the acceptance clause, use in a live environment meant deemed acceptance, defeating the argument that the customer could still reject the software.[1]
- Follow notices through in writing. A single notice of non-compliance without the follow-up request for a refund did not protect the customer.[1]